Ernest Liu from Princeton University will present "The Bullwhip: Time to Build and Sectoral Fluctuations"

Abstract: We develop a theory of sectoral fluctuations due to amplification of demand shocks along supply chains through heterogenous time-to-build and solve the model in closed form. We show that downstream demand shocks get amplified along the sectoral supply chain and result in large fluctuations in upstream sectors creating the sectoral bullwhip effect. Empirically and quantitatively, we show that the bullwhip is significant for all downstream sectors that are important in the consumption bundle of the aggregate consumer.